Finance Minister Pranab Mukherjee on Monday proposed to raise the income tax exemption limit for general tax payers to Rs 1.80 lakh per annum from Rs 1.60 lakh at present and introduced a high new tax slab for senior citizens of 80 years and above.

Unveiling the Budget proposals for 2011-12 in the Lok Sabha, he also proposed to reduce the age limit for consideration as senior citizens from 65 years to 60.

Senior citizens will get tax exemption for income up to Rs 2.5 lakh, higher from Rs 2.4 lakh now. As per the announcement, the increase in the income tax exemption limit for general tax payers (excluding women and senior citizens) to Rs 1.8 lakh per annum would translate into a benefit of Rs 2,000 for all tax payers.

At present, the general tax payers earning more than Rs 1.6 lakhs per annum are required to pay income tax.

Introducing a new tax slab for very senior citizens (80 years and above), Mukherjee said, they will not have to pay any tax for annual income up to Rs 5 lakh.

With a fair dose of reforms in the form of direct kerosene and fertiliser subsidies to users, finance minister Pranab Mukherjee also promised to check inflation and corruption and push growth.

Stating that India had bounced back after the global financial crisis with broadbased growth, he said inflation remained a matter of concern, especially in food prices, though it had dipped from over 20% to around 7% now.

The finance minister also said more allocations were being made during this fiscal for areas such as agriculture and education, in a bid to reap the demographic dividend that is already seeing India having the largest working population in the world.

This apart, he said the foreign direct investment policy was being revamped, which may result in the entry of multinational firms in the country's $300 billion retail trade industry, apart from liberalising the norms governing pension and insurance funds.

"We are reaching an end to a remarkable year with high growth and many challenges. Our growth in 2010-11 has been swift and broad-based. Economy is back to pre-crisis growth trajectory," Mukherjee said in his opening remarks.

"In the medium term, our three priorities of maintaining high growth trajectory, making development more inclusive and improving our institutions remain relevant," the minister added.

This is the sixth such exercise for the 75-year-old politician. He tabled three budgets between 1982 and 1984. The one unveiled Monday was the third successive one for the United Progressive Alliance (UPA) government.

Expectations were high from both households and the corporate sector as this budget is being presented against the backdrop of high inflation, fluctuating industrial growth, erratic exports and a general perception that the reform process has retarded.

"I do not foresee resources being a major constraint, at least in the medium term," Mukherjee said, referring to the money needed to address the larger agenda of growth, social programmes and infrastructure development.

He said the farm sector had shown a rebound with 5.4% growth, industry was regaining its earlier momentum and services continued to grow at double digits. He added that fiscal consolidation too was impressive.